 Does the Dodd-Frank Act reduce the conflict of interests of credit rating agencies?Francesca Toscano Journal of Corporate Finance, 2020, vol. 62, issue C Abstract: I compare issuer-paid ratings, represented by Standard & Poor's (S&P) to investor-paid ratings, represented by Egan-Jones Ratings Company (EJR), after the passage of the Dodd-Frank Act. My results show that S&P ratings are lower than EJR ratings in the post-Dodd-Frank period, especially for firms able to generate revenue to credit rating agencies (CRAs); i.e., firms with a large bond issuance, larger firms, and low-performing firms. Further, I find evidence of a greater accuracy of S&P ratings relative to EJR ratings in the post-Act period as shown by the lower probability of large credit rating changes and rating reversals. Finally, I show that issuer-paid ratings are more concerned about providing timely ratings in the post-Dodd-Frank period, thus protecting their reputation as leading information providers, than investor-paid ratings. My results are robust to a wide battery of robustness tests. Keywords: Dodd-Frank; Credit ratings; Reputation; Issuer-paid; Investor-paid; Conflict of interests; Market anticipation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:62:y:2020:i:c:s0929119920300390 DOI: 10.1016/j.jcorpfin.2020.101595 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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